An evolutionary explanation of risk aversion.

We generally assume that healthy humans are risk averse, that we avoid risky situations with uncertain outcomes. In avoiding risky situations we go unharmed (psychologically or physically) and maintain essential resources (e.g., food, money etc). Understanding risk aversion is important since it has many applications to survival, policing, the financial sector (e.g., investors and traders) and so on.

In recent years many studies have been conducted to investigate attitudes toward risk with life experience, education and age among the factors involved in risk aversion. A growth in research into the genetic influences on risk aversion has also been seen in studies that reveal the role of genetics in preference determination. In 2009 Kahnun and Chiao found that people who carry the s/s allele on the 5-HTTLPR gene take 28% less risk than individuals who do not. If genetics are involved in risk aversion then these behavioural preferences are at least in part due to the result of a long and selective evolutionary process.

A recent research paper from the Journal of Economic Psychology has sought to provide an evolutionary explanation for risk aversion. The paper by Levy (2015) took the evolutionary standpoint of the number of off-springs that are required to pass on an individual’s DNA. From the evolutionary perspective the more resources that an individual has at their disposal the more healthy off-spring they can produce. The measure used by Levy was the probability of having descendants forever given the choice on a gamble (pHDF).

The results of the analysis in the paper by Levy (2015) reveal that constant relative risk aversion can be viewed as an evolutionary developed heuristic with the aim of maximizing the probability of having descendants to pass on DNA. This research links into heuristic decision-making strategies and risk-aversion research in other areas of judgment and decision-making by emphasising the role of genetic factors in decision-making styles.

Source article: Levy, (2015).

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Daniel Edgcumbe

I am studying towards my PhD in cognitive neuroscience at a leading London university

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